A new report from the Central Bank of Nigeria (CBN) has revealed that President Muhammadu Buhari-led’s administration has borrowed a total sum of N14.86 trillion from the CBN through Ways and Means Advances since the administration came to power in May 2015.
Federal Government’s total debt from the CBN stood at N648.26 as of June 2015, a month after President Buhari was sworn in. The debt rose to N856.33 billion by December 2015 and N2.23 trillion by December 2016, the CBN data has shown.
“Ways and Means Advances is a loan facility used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.”
Government borrowing from the central bank rose to N3.31 trillion in 2017, representing an increase of N1.08 trillion. Buhari further borrowed N2.1 trillion in 2018 to take total borrowing to N5.41 trillion.
This continues in 2019 as the Federal Government took another N3.31 trillion loan from the CBN to hit N8.72 trillion in debt.
In 2020 during COVID-19, the Federal Government borrowed N4.9 trillion to plug its fiscal financing gap, bringing government’s total borrowing to N13.11 trillion.
In the first half of 2021, the Federal Government borrowed an additional N2.4 trillion from the apex bank to take its total borrowing to N15.51 trillion (N13.11 trillion plus N2.4 trillion).
However, deducting the N648.26 billion debt met by President Buhari from the total debt of N15.51 trillion revealed that Buhari’s administration has borrowed N14.86 trillion in the last six years.
Experts have warned that Federal Government abuse of Ways and Means Advances stipulated at five percent of the previous fiscal revenues could raise risks to macro-stability in the context of weak institutional safeguards that preserve the credibility of policymaking and the ability of the central bank to control inflation.
“The CBN’s guidelines limit the amount available to the government under its WMF to five per cent of the previous year’s fiscal revenues. However, the FGN’s new borrowing from the CBN has repeatedly exceeded that limit in recent years, and reached around 80 per cent of the FGN’s 2019 revenues in 2020,” Fitch Ratings stated in January 2021.
Commenting on the situation, Mr Bismarck Rewane, the Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, said the government needs to securitise borrowing from CBN.
He said, “N15tn is about 45 per cent of total money supply. So, if, for example, those ways and means advances were securitised today, people will have to invest in government securities and it will reduce money supply by 45-50 per cent.
“What we need to do is to actually securitised this formally. But I think that right now, the Federal Ministry of Finance or DMO is paying interest on the ways and means advances. So, the effect is that there is a cost to the borrowing, and the central bank is receiving the interest on it.”
